Core Insights - Bitcoin has experienced a significant decline, losing approximately $40,000 from its early October peak, which represents a 30% decrease, yet it remains above its fair-market value according to certain valuation models [1][6]. Valuation Model - A valuation model based on Metcalfe's Law suggests that the value of a network, such as Bitcoin, is proportional to the number of users. This model indicates that Bitcoin is currently overvalued, with a fair value estimated at around $53,000, which is about 38% lower than its current price [2][3]. - The model was previously discussed in September 2024, where it was noted that Bitcoin was already overvalued at that time, despite its price more than doubling since then [2]. User and Ownership Dynamics - The application of Metcalfe's Law assumes that the number of mined bitcoins corresponds to the number of users. However, this assumption is flawed as many individuals own multiple bitcoins, while others own only fractions, and some bitcoins are permanently lost [5]. - Despite its imperfections, the Metcalfe's Law model is considered a useful tool for discussing Bitcoin's fair value compared to various other narratives that have been proposed and discarded over time [5]. Price-to-Fair-Value Ratio - Currently, Bitcoin's price is approximately $33,000 higher than the fair value suggested by the Metcalfe's Law model, resulting in a price-to-fair-value ratio of around 1.6 to 1. This ratio is significantly lower than historical highs of 3.2 and lows of 0.4 observed over the past five years [6][7]. - Even during Bitcoin's peak earlier this year, the price-to-fair-value ratio did not exceed 2.4, indicating that the recent price surge above $100,000 did not invalidate the relevance of the Metcalfe's Law model [7].